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Two producers in the Thompson Divide area of western Colorado that could be an onramp to unleashing Mancos Shale supplies Tuesday received a two-year extension on their natural gas leases, to allow time for the Bureau of Land Management (BLM) to conduct a new and unprecedented post-leasing environmental review of a broader region, according to the Western Energy Alliance (WEA).

The local BLM office suspended the 25 leases belonging to two privately held exploration and production (E&P) companies that have been on hold for years. The leases had been nearing their expiration dates. The BLM suspension essentially keeps the leases alive, but still inactive, until April 1, 2016 while the federal agency does a second-bite-at-the-apple environmental assessment of 65 leases in the White River National Forest, including the suspended leases.

While strongly opposing environmental and Congressional attempts to keep Thompson Divide from being developed, the alliance and the West Slope branch of the Colorado Oil and Gas Association (COGA) lauded the BLM in extending long-held, but unused, leases by SG Interests and Ursa Piceance LLC. A western branch COGA official, however, warned that what he called an unprecedented move by BLM to launch the post-leasing environmental review could eventually render the leases uneconomic if new after-the-fact requirements are tacked on.

Further complicating the situation from the producers’ standpoint, Colorado's two U.S. senators, Michael Bennet (D-CO) and Mark Udall (D-CO), have proposed legislation (S 651) to have leases in the Thompson Divide withdrawn by eliminating future leases and buying back existing ones.

At stake are leases on 18 parcels totaling 21,167 acres that SG holds in Pitkin County, part of more than 309,000 acres of federal leases south of Glenwood Springs, CO. In addition, Ursa holds leases of about 12,000 acres, the majority of which are in Garfield County in the Piceance Basin. Affluent property owners in and around the White River Forest area have been successfully opposing oil/gas development in the Thompson Divide for years.

BLM's local office said Tuesday it was starting a “scoping period" to allow the public to express concerns and issues they want addressed in the latest effort to draft an environmental impact statement (EIS). "Public involvement is a critical piece of the analysis," said BLM Colorado River Valley Field Office Manager Steve Bennett, adding that the agency expects to release a draft EIS and alternative by early next year.

Bennett said the agency was conducting another environmental review "to address deficiencies in the existing environmental analyses for these leases." He stressed that the U.S. Forest Service was the lead on the earlier environmental review, and BLM did not choose at that time to do its own EIS, but subsequently it has now decided to do so, an action that WEA and COGA characterize as having some far-reaching and negative impacts on the oil/gas industry.

It's been called "retroactive-NEPA (National Environmental Protection Act)," but federal officials are not saying what that means, according to COGA western branch Executive Director David Ludlum.

Ludlum said it could take years to get through the latest process, which he fears will either kill development in the area by extending the environmental process or by attaching unworkable requirements after the fact to the leases, some of which already have producing wells on them.

"The organized and well-financed opposition has done everything to denigrate and devalue the leases held by about five of our member companies in the areas," said Ludlum, referring to the Thompson Divide Coalition and Wilderness Workshop environmental groups, which he accuses of using political pressure to hold up drilling on the leases for years.

Ludlum called the BLM's launching of the latest EIS effort "nationally precedent-setting," allowing for the possibility of "canceling or significantly modifying the terms of leases that already have producing wells on them."

He argues that the current issues are not about the environment, but really about "demographics" -- wealthy property owners who use large amounts of energy opposing new oil/gas development in their neighborhoods.

West Coast Correspondent | Los Angeles, CARichard Nemec began writing for NGI in 1995 and has 30 years experience in the energy industry. He holds BA from the University of Southern California, Los Angeles; and a MA in journalism from Northwestern University, Evanston, IL; and completed MBA courses at Northwestern's Evening Graduate School of Management.
rich.nemec@naturalgasintel.com

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